The Israeli government last night stepped into the row over the French ambassador to London, Daniel Bernard, who is alleged to have spoken about "that shitty little country Israel".

Raanan Gissin, spokesman for the Israeli prime minister, Ariel Sharon, said if Mr Bernard had made the comment, he should resign or the Israeli government would assume the French government condoned that view.

Describing it as pure anti-semitism, he said it was particularly insensitive given the record of collaboration by some French officials during the second world war when they helped in sending Jews to concentration camps.

Labour MPs in Britain who are members of the Friends of Israel group yesterday called for Mr Bernard to resign or be sacked.

A spokesman for the French embassy, Yves Charpentier, said no formal protests had been received by the embassy. In its initial response on Tuesday, the French embassy was careful not to deny that Mr Bernard had made the remark, insisting instead that it had been distorted and that he had been referring to Israel's size geographically.

Early yesterday, Mr Charpentier said Mr Bernard could not remember saying it.

By late afternoon, Mr Charpentier described Mr Bernard as "cross" and denied categorically that he made the remark: "He did not use those words."

He said the French ambassador, whom he described as neither anti-Israel nor anti-semitic, saw no need to apologise.

Mr Bernard is alleged to have made the remark at a dinner party last Friday hosted by Conrad Black, owner of the Daily Telegraph.

The comment was reported yesterday morning in the Israeli daily, Maariv. The Israeli foreign ministry, anxious not to have a full-blown diplomatic incident, issued a non-committal statement last night: "The ministry does not intend to react."

But in private, the foreign ministry was incandescent. One source described the remark as so contemptible it did not deserve a response.

The Israeli prime minister's office was more outspoken. Mr Gissin said: "If he did say that, it is pure anti-semitism. One would not expect that from a representative of the French government. There is no doubt that if such a statement was made, it requires a strong condemnation."

Referring to France's role during the second world war, he said: "Sixty years after Jews have been at ground zero, with the help of French officials, French officials should have some understanding of the words they utter in such a volatile situation as in the Middle East today."

Asked whether Mr Bernard should remain in his job, Mr Gissin said: "It is for the French government to decide. If the French government does not take action, it would imply that the French government condones it and I think that would be inconceivable."

Labour MPs Jim Murphy and Gwyneth Dunwoody, who are members of Labour Friends of Israel, have written to the French president, Jacques Chirac, calling for Mr Bernard to resign or be sacked.

Mr Murphy, chairman of the group, urged Mr Chirac to tell Mr Bernard to "come clean and apologise for the hurt and offence he has caused".

He added: "If these are his views, then the French government should take action. Such views are simply not consistent with the post he holds."

The group's president, Ms Dunwoody, said: "These comments are eerily familiar from the French. He should resign immediately and I'm writing to President Chirac to demand that if he does not resign, then he should be sacked."

A French foreign ministry spokesman in Paris insisted there had been no repercussions in France's relationship with Israel.

"These malevolent insinuations have been addressed very clearly by our ambassador in London and I suggest you refer back to that," a ministry spokesman said during a regular media briefing.